Thursday, October 17, 2013

Keurig loses big time at the CAFC in coffee cartridge case turning on patent exhaustion

But that is not the case before us, which presents an a
fortiori fact situation in which the product sold by Keurig
was patented. Keurig acknowledges that its brewers are
commercial embodiments of the apparatus claims of the
’488 and ’938 patents. Appellant Br. 27–28. Keurig did
not assert its cartridge patent against Sturm and does not
dispute that its rights in its brewers were exhausted with
respect to the apparatus claims of the asserted patents.
See generally Reply Br. Instead, Keurig alleges that
purchasers of its brewers infringe its brewer patents by
using Sturm cartridges to practice the claimed methods
and therefore that Sturm is liable for induced infringement.
However, as the Supreme Court long ago held,
“[W]here a person ha[s] purchased a patented machine of
the patentee or his assignee, this purchase carrie[s] with
it the right to the use of the machine so long as it [is]
capable of use.” Quanta, 553 U.S. at 625 (quoting Adams
v. Burke, 84 U.S. 453, 455 (1873)). The Court’s decision in
Quanta did not alter this principle. Keurig sold its patented
brewers without conditions and its purchasers
therefore obtained the unfettered right to use them in any
way they chose, at least as against a challenge from
Keurig. We conclude, therefore, that Keurig’s rights to
assert infringement of the method claims of the ’488 and
’938 patents were exhausted by its initial authorized sale
of Keurig’s patented brewers.

The CAFC amplified

To rule otherwise would allow Keurig what the Supreme
Court has aptly described as an “end-run around
exhaustion” by claiming methods as well as the apparatus
that practices them and attempting to shield the patented
apparatus from exhaustion by holding downstream purchasers
of its device liable for infringement of its method
claims—a tactic that the Supreme Court has explicitly
admonished. Id. at 630. “Such a result would violate the
longstanding principle that, when a patented item is ‘once
lawfully made and sold, there is no restriction on [its] use
to be implied for the benefit of the patentee.’” Id. (quoting
Adams, 84 U.S. at 457). Here, Keurig is attempting to
impermissibly restrict purchasers of Keurig brewers from
using non-Keurig cartridges by invoking patent law to
enforce restrictions on the post-sale use of its patented
product. Id. at 638.
We agree with the district court that a consumer’s potential
use of different types of cartridges, viz., cartridges
that would not infringe the claimed methods, cannot save
Keurig’s method claims from exhaustion. Such an outcome
would also be counter to the spirit of the doctrine of
patent exhaustion because Keurig could control use of the
brewers after it sold them. The claims of both the ’488
patent and the ’938 patent are directed to the brewers and
the use of the brewers; therefore, Keurig cannot preclude
an individual who purchased one of its brewers from
using a non-Keurig cartridge with that brewer.

Note also

Moreover, Keurig’s argument that patent exhaustion
must be adjudicated on a claim-by-claim basis is unavailing.
The Court’s patent exhaustion jurisprudence has
focused on the exhaustion of the patents at issue in their
entirety, rather than the exhaustion of the claims at issue
on an individual basis. See id. at 634–35; Univis, 316
U.S. at 249–50. Keurig’s decision to have sought protection
for both apparatus and method claims thus means
that those claims are judged together for purposes of
patent exhaustion.

Policy is invoked

The doctrine of patent exhaustion has the effect of
providing an efficient means for ensuring the termination
of the patent right. See Univis, 316 U.S. at 251 (“[T]he
purpose of the patent law is fulfilled . . . when the patentee
has received his reward . . . .”); United States v. Masonite
Corp., 316 U.S. 265, 278 (1942) (“The test has been
whether or not there has been such a disposition of the
article that it may fairly be said that the patentee has
received his reward for the use of the article.”). Permitting
Keurig to recover multiple times on its patented
brewers by holding Sturm or any other cartridge manufacturer
liable for direct, induced, or contributory infringement
based on the independent manufacture and
sale of cartridges for use in those brewers would be contradictory
to these policies and the law.

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I'm a patent lawyer located in central New Jersey. I have a J.D. from the University of Chicago and a Ph.D. from Stanford University, where I studied graphite intercalation compounds at the Center for Materials Research. I worked at Exxon Corporate Research in areas ranging from engine deposits through coal and petroleum to fullerenes. An article that I wrote in The Trademark Reporter, 1994, 84, 379-407 on color trademarks was cited by Supreme Court in Qualitex v. Jacobson, 514 US 159 (1995) and the methodology was adopted
in the Capri case in N.D. Ill. An article that I wrote on DNA profiling was cited by the Colorado Supreme Court (Shreck case) and a Florida appellate court (Brim case). I was interviewed by NHK-TV about the Jan-Hendrik Schon affair. I am developing ipABC, an entity that combines rigorous IP analytics with study of business models, to optimize utilization of intellectual property. I can be reached at C8AsF5 at yahoo.com.